AMD Says Oracle Is Pledging Widespread Use of New AI Chips

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1:10Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts. or watch us live on YouTube. Oracle will deploy a large batch of AMD's forthcoming MI450 chips next year. It's kind of like our AI story of the day. It seems like every day we've got one of these stories of these tech companies doing business with one another, maybe even involving some investments in each other. Anurag Rana, it's his job to keep it all straight here.

1:49He's a technology analyst at Bloomberg Intelligence. Anurag, if you're Oracle, if you're AMD, is this just business as usual? Or is this something new and unusual? The slight unusual part is that the AMD chip seems to be doing that parity at what NVIDIA chips are for this particular case. Now, I do not know what kind of workloads Oracle will put on it. So you really can't do an apples to apples comparison. But the story at this point is Oracle has a massive backlog of orders and it needs to invest money to get them converted into revenue. They need to open more data centers or rent out more data centers.

2:26They need to buy more chips, buy more hardware. and combine all that together. And eventually, then they're going to get paid for all that stuff. So they're going anywhere they can find chips right now. And, you know, it seems that AMD is their next stop. So there are a couple of threads to pull on there. It feels like AMD is increasingly the number one alternative to NVIDIA's chips. We can talk about that in a little bit. But what struck me is that there's no dollar amount disclosed in this deal or partnership or promise. The previous deal that AMD struck with OpenAI just said tens of billions of dollars in new revenue.

3:00Why are firms keeping it so vague? Well, because they do not know how many chips they would need, at what point, at what capacity. This is a, you know, that's not, you know, it's more so signaling that we are not just truly dependent on NVIDIA. We have other options as well. It helps them with navigating in terms of pricing from NVIDIA also. You know, we know NVIDIA chips are getting expensive over the last few years. So there could be one reason. The other thing we don't know is what kind of workloads there are, because we know for the absolute best of the best, you have to use NVIDIA chips. That's what we know as of today.

3:36Whether all of that changes in 12 to 18 months, we don't know. But there are other workloads that may not require that amount of, you know, firepower or horsepower, you could say. For that, you may use, you know, AMD chips or something even more inferior. And even yet another announcement in your space today, Anurag, Salesforce, a company you've been talking to us about for many, many years. Salesforce and OpenAI today announced an expanded strategic partnership. What's going on there? Yeah, so for me, this is actually a far bigger news and has more ramifications in the long run. If you see what's been happening in the software landscape over the past two years, the threat is that OpenAI will come and it'll take away basically the businesses of all the application software vendors, whether that's Adobe, Workday, Salesforce, HubSpot, you name it.

4:28Because OpenAI has shown capabilities that their model can help out in functions such as finance, human resources, sales automations, et cetera. This integration between the world's biggest CRM software vendor, which is Salesforce, and OpenAI shows that both of them will be working together. And it'll be easier for enterprises to go inside OpenAI, ChartGPT, ask for what they want. That gets connected to the data that resides in Salesforce, makes it very easy for the enterprise customers to do their work as well, rather than just going into Salesforce. So I think this is a bigger news in the long run.

5:08But, you know, we are all talking about Oracle as well. Yeah. OpenAI announces a new deal with someone every day, Paul. This is kind of what you're getting back to. And this really, both of these announcements are the latest in this string of big tech, building more computing infrastructure and meeting this demand, this insatiable demand. I've really lost track of the permutations. Anurag, what worries you about these back and forth announcements and partnerships and the billions of dollars that may or may not change hands. Do we think that these are just announcements that may not come to fruition if circumstances change, for instance, in the next six months?

5:46See, from a Salesforce point of view, which is what I was, you would say most of us are worried about, also legacy software names. It's a good thing because OpenAI is a new channel of communication with the rest of the world. If you can integrate your product with them, it kind of saves you from getting disrupted. The question is in the long run, and then we'll find out what happens is, will OpenAI have that much level of funding to keep up with all the promises that they have? They have given very high revenue estimates for the next few years. But at the same time, I mean, the rest of the biggest tech vendors are not just sleeping at that point, I would say.

6:24We'll find out whether OpenAI will be able to gain market share from the likes of Microsoft, Apple, Google, and Meta or Amazon. or this is going to be just an expansion of the overall market. Stay with us. More from Bloomberg Intelligence coming up after this.

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8:01We'll be right back. It's kind of, I don't know, in transition. That's probably the polite way to say it is the auto industry. And we saw General Motors today incurring a$1.6 billion in charges related to paring back electric vehicle productions plans due to flagging federal support for plug-in vehicles. Steve Mann joins us. He covers the global autos and industrials industry for Bloomberg Intelligence. Steve, tell us what's in this charge. Why is GM doing this and why is GM doing this now? Look, Paul, I used to work at GM prior to being an analyst on the sell side. And look, I think what GM is doing today is a little bit unprecedented because they're actually changing, shifting that, changing the direction of that ship around fairly quickly.

8:49You know, once, you know, when the$7 ,500 subsidy expired, you know, they knew they had a portfolio that was not congruent with what they think sales is going to be. So they're going to have to rationalize that portfolio. They've been the most aggressive, if not globally, but among the top, you know, the big three in Detroit in rolling out new EVs. So, you know, they're going to have to review that portfolio, maybe even wean out some of the lower sales, less profitable EVs going forward. Yeah. What surprised me about this action, like you said, they've been pretty aggressive on the EV front, is Ford has delayed or scrapped some plug-in models and definitely moved money away from the EV business, which it's been losing money on.

9:39And it seemed like General Motors was taking the stance of like, no, that's not us. We are going forward with this. Is GM simply catching up to the economic realities that Ford has already acknowledged? Or is there a different strategy at play here? I think it's really hard to foresee. These policies are changing so fast. You know, with Biden in the administration, there was a huge push. You know, not just GM, but a lot of automakers was pushing EVs. You had new startups like Rivian, like Lucid, pushing EVs. But, you know, things have changed. and look, GM is reacting to it. It's interesting you brought up Ford and now actually Ford, Chris Farley, looks actually pretty good, right?

10:20He looks like he made the right call. But I think, you know, if you look at the bigger picture, what GM is doing today is probably just the beginning. We'll probably hear more, not just from GM, but from the other makers in terms of their EV plans going forward. Has this changed the way you're viewing the evolution to EVs that, hey, maybe it's not going to be as far as we thought or as quick as we thought? How should we think about that? Because it seems to have lost steam. And I'm not sure if it's just tied to this administration and its policies and names, or is it more market driven? Well, I think it's up in the air.

10:59Personally, I still think there is a market for EVs, not necessarily in the U.S. You know, the Chinese are still pushing EVs. The Europeans, to a certain extent, are also pushing EV. I think, you know, with the current policies of no subsidies, no penalties for, you know, selling gas guzzlers and, you know, U.S. consumer still loving the gasoline engine. I think it's just going to take a little bit more time to shift to greater penetration EV. Look, there is demand, right? Because if you look just before the expiration of the$7 ,500 subsidy, we did see a spike in EV sales, BEV sales. So there is a certain segment of the consumer that is looking for EVs.

11:51And I think a lot of people who have driven EVs love them. So look, it's just going to take time, right? It's going to take time to get there. there's uh there's still other hurdles that the ev industry has to has to overcome for example the the charging infrastructure you know that that needs to be built out yeah no no kidding um which legacy automaker not just in the u.s but around the world um has figured out you know the best approach to evs you know gotten the balance correctly yeah i just take a step back i think gm is probably the best because they actually have... Even with this about face?

12:31Yes, because they're reacting to reality fairly quickly. Look, they're cutting back on the U.S. EV capacity, potentially EV product offering, but they're actually doing fairly well in China. They do have plug-in hybrids. They do have extended range EVs, which I think we talked about it here before. and they also have battery electric vehicles in China. And, you know, sales have been improving over the past few quarters over there. Stay with us. More from Bloomberg Intelligence coming up after this.

13:08You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. I think back in the pandemic, we all became, whether we wanted to or not, we became experts on the global supply chain and how fragile that is. And that is no more evident than in the airline business and aircraft manufacturing business. Apparently, it's not an easy thing to build a jet aircraft here. You need specialized skills and people with those skills.

13:45That's still rippling through the aviation and aerospace industries. Boeing and Airbus are suffering, quote, unprecedented delays in certifying delivering aircraft, stifling airlines' growth and plans to decarbonize, customers are saying. George Ferguson joins us here. He's a senior aerospace defense and airlines analyst for Bloomberg Intelligence. George, we're well past the pandemic here, and I know you've educated us and explained to us just how intense these supply chains are and how complicated they are. Give us an update on the ability of Airbus and Boeing to deliver aircraft to their customers?

14:20Yeah, so I think the update would be that Boeing is converging, I think, on Airbus as far as delivery numbers. You know, Airbus sort of came out of the pandemic with supply chains, I think, in relatively better shape. And they were doing better at deliveries because of that. But recently things have stagnated. And so Airbus has been having problems getting engines from specifically GE, which is making it hard for them to deliver their bread and butter aircraft, the A320. During the month, they delivered 59. A320 is not bad, but they want to be at 75 a month by 2027. And they have months where they're in the 40s.

15:03And so very sporadic. Again, I think a lot of it has to do with that GE supply chain. So it was an okay month, I think, for Airbus and an okay quarter they have a lot of work to do to get to their targets for the end of the year uh boeing just reported deliveries they're in the 50s most importantly 737s are around 40 i think it was for the month uh which is a pretty good number it's been uh it's a little bit less than august but has been improving that's that's how they're going to drive cash flow and profitability better cash flow and profitability. So it looks like Boeing really starting to get their throughput in the factory sort of in hand and working well and starting to deliver some of that inventory aircraft, which will reduce some of the drag on their earnings.

15:55So at a recent industry conference, Ben Smith of Air France KLM said, for some long haul airplanes, we've been waiting for certification for seven or eight years, which is unprecedented. What's going on with some of those wide-body jets? Yeah, I mean, the 777 is, I think he's referring to the 777, right? Boeing has been trying to get the 777X, their latest version of the 777 certified, and it just keeps pushing. And recently, it pushed from a 2026 initial delivery to a 2027. I think, you know, a lot of these airlines, you know, they're looking for this airplane because it's going to be the biggest in the sky, right?

16:36Since the 747 and the A380 have been retired, this is going to be sort of the biggest seat count you can get. So it's really good for driving seat cost efficiencies at airlines. It's still, though, a small portion of Boeing's business. I mean, the backlog's, I think, around 400. So it's not huge. The biggest backlogs are to the Middle East. to Emirates and to Qatar. And my guess is that as Boeing manages challenges in the engineering workforce, unfortunately, 777 sometimes maybe gets some short shrift. And so certification sort of keeps getting pushed on that one. U.S. government shutdown can't be helping this industry in terms of getting a certification and things like that.

17:21Are any of the companies calling that out as a challenge? Not yet. I mean, we're about to go into earnings season, right? So they're all in a quiet period. I think we'll hear it, but I think you're right. The FAA, I'm sure, is not working at, you know, sort of full gallop at this point, given the government shutdown. There are some folks, I'm sure, that still have to work, but it's not going to help certification. We'll see how much longer it lasts. Again, 777, we'd like to see certified and delivered. We think Boeing still can keep that line open well into 2027. They have a lot of orders for the freighter still.

17:59But, you know, companies like Emirates, Air France, KLM, Qatar chomping at the bit to get that airplane in the portfolio. Lufthansa too. What's the labor situation in the aerospace business? You explained to us that the industry lost a lot of talented, skilled people during the pandemic. And it's kind of hard to find these people and retrain them. Yeah, it's getting better. And I think you can sort of look at some of those labor indicators like these surveys that show jobs open and people looking for jobs. During the pandemic, there were a lot more jobs open than people looking for jobs. That's since crisscrossed.

18:37So that will improve stability in the aerospace supply chain. I guess it's not as an exciting career as it maybe it was back when I was a boy, I guess, which was a long time ago. And so, you know, there's people that would love to be able to work at home. You can't really do that when you're manufacturing airplanes. So they've had a hard time sort of backfilling a lot of the baby boomers that left. And the new workforce just isn't as, I would say, I don't know if it's fair, adept with their hands maybe as the boomers. And so they're bringing people in that haven't worked manufacturing and trying to teach them how to do that kind of business, which makes it even harder to train up.

19:19But it is improving. Again, we're seeing it, I think, in the throughput we're getting out of Boeing. The delivery numbers today are an indicator of it. And as we see the, you know, the the what I call it, the employment situation get back in balance, it'll help. Stay with us. More from Bloomberg Intelligence coming up after this.

19:41You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. There's a million important things we can talk about, but I have to lead off with this. Kelanova offering a version of Pop-Tarts with higher protein content starting in early November. This follows Pepsi's plan for higher protein version of Doritos. How do we know what protein is and how you add it into something? Jen, what's going on here? Hi, Paul. So really what we're seeing is a lot of these packaged food companies are tapping into this protein trend.

20:21It's something that consumers are really looking for. And at the end of the day, when it comes to PepsiCo or it comes to Kelanova, this is really about making people feel marginally better about eating food that is bad for them. Let's just be honest about it. So when you put protein on the package, people feel like even if they're making a bad choice, It's not as bad as it could have been. And that's really what's behind this. It's like the equivalent of vanity sizing at retailers, right? You know, you're actually a size six, but we're going to tell you you're a size two. So you feel better and buy more clothes.

20:54Is this as simple, Jen, as just adding protein powder on top of the Kellogg's Pop-Tarts? Excuse me, Kelanova Pop-Tarts? Yes. So what they've done is they've added protein into the pastry part of the Pop-Tart. And that changes the texture and the taste just a little bit. But what's really interesting is the consumer trend behind it. You know, we ran a proprietary protein study back in the middle of the summer. And what we saw was that almost 40 % of consumers eat something with protein enhanced, whether it's a snack or a beverage, on a weekly basis. And, you know, at least 38 % said that they're eating more protein enhanced products in the last three months.

21:35So clearly there's a consumer uptake. There's interest in this. And that's what these companies are really tapping into. Do I want more protein? Do I need more protein? I'm eating more egg whites, but that's because it's available at work. What are you doing? I don't know. It's the same thing I've always done. Your goldfish do not have extra protein on them. Goldfish do not have extra protein. Neither of you are on GLP-1 drugs, right? But protein is a big solution for people who are on those drugs because you tend to lose muscle mass as a side effect of those drugs. And so as the uptake of GLP-1 goes up, there's more and more demand for these protein inhalers.

22:10There you go. That's what I needed. OK, now I'm at a cocktail party and I need to sound smart on proteins. Now I got my. But apparently fiber is the new protein. And Jen, didn't the PepsiCo CEO say something about this? Yeah. You know, whether it's anything that helps kind of enhance the product. So when you talk about Doritos, they have additional milk protein being added, you know, higher fiber products. All of these things are things that people, the average consumer perceives as having a health or wellness benefit. And people are trying in small steps to be a little bit better about their health.

22:45All right, let's get to another story I thought was really interesting. Walmart partners with OpenAI to offer shopping on ChatGPT. This sounds like a natural. What's going on here, Jen? Yeah, this is an interesting move, but I think it really illustrates sort of that trend of what's happening across retail in general. Walmart's really been very good about doing experimentation and kind of checking out what the opportunities are, whether it comes to social media and social commerce, particularly. And this latest partnership with OpenAI, this really does tap into that as well. Now, social spending is still very small in terms of the overall percentage of what retailers are achieving, but it's important to be present.

23:30And I think that's what's most notable about this announcement. What is social spending and how do the numbers differ from normal shopping through Walmart's website or going into Walmart's actual stores? Yeah, so social commerce is when you're on a platform, whether it's on ChatGPT now or whether it's on TikTok or whether it's on Facebook or any of the social media platforms. And you have the ability to add to cart and buy now. That's social commerce. But it's still a tiny, tiny fraction of the overall e-commerce that happens for these companies. So while it's important in terms of their showing that they're present and that they're aware of new technologies, it's not going to move the needle with regards to their overall e-commerce sales or their overall business mix at this point.

24:19Jen, we've got a little bit more data, a little bit more time. As it relates to tariffs, what's your best guess as to what your packaged food companies, your retailers, How are they kind of segmenting the tariffs before maybe passing along something to the consumer? Yeah, it's a complicated situation, Paul. And really what's happening is, you know, where they can find alternative sourcing, a lot of companies have been trying to do that. There are some companies in packaged food where that's not as easy. So I would take McCormick as an example where a lot of spices you can't produce domestically or you can't source domestically.

24:54And then it becomes a question of how do you negotiate with partners? Do you find alternative countries of origin that maybe have slightly lower tariff levels? And it's also a lot of effort right now is going into finding efficiencies that can help offset those costs so that they can absorb some of that cost and not have to pass it on to consumers. Ultimately, most of the companies we're talking to are saying that where needed, they will very strategically pass price through. But they're trying to avoid a uniform, unilateral price increase just due to tariffs. How much of this work has been done, what you just described?

25:30And I guess I wonder how much of it will be covered in the earnings calls this quarter. I think it will be definitely a topic of the earnings calls this quarter. But when we had tariffs back in 2018, a lot of companies started the process of identifying other options for sourcing. So there's probably been more progress made than people would recognize because it didn't just start this year. And so it's been sort of a gradual shift. And once they have those plans in place, they can sort of accelerate that. And then the focus really is on efficiencies. And that's where the technology comes back into play, where it helps them be better with regards to their sourcing, their negotiations, and really in terms of understanding what products they actually need to carry.

26:17and which products they could perhaps suspend or discontinue. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

26:47Thank you.